“You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business.”
– Warren Buffett
A misconception among small business owners is that accounting only involves managing your books and paying your dues. But there are many little things in accounting that you should consider. This is where the problem usually starts.
If you’re not careful, you might end up messing up your cash flow, or worse, paying penalties for unpaid taxes.
It’s time to look at your accounting practices and make sure you’re not making any of these mistakes.
1. Mixing Personal Spending with Business Spending
Confusing your personal spending as a business spending is a common mistake among entrepreneurs. For instance, when you’re doing your monthly supplies run, it’s easy to pick up some items for personal use and unintentionally tag all them as a business cost.
The key is to keep all your receipts. This way, you have proof of your expenses should your business requires to be audited.
Worried about losing receipts? Scan or take photos of them, so you have a digital copy. Consider filing them by month or year and labelling them appropriately by category or department. When you categorise your business expenses, you won’t have problems finding records or receipts.
2. Taking Sales Tax for Granted
It’s quite easy to forget about your sales tax —especially if you have no idea how to deal with them.
To make sure you’re complying with all your tax requirements, consider consulting or hiring experts to look into your finances.
3. Working with an Inexperienced CPA or Bookkeeper
Your CPA and bookkeeper are your sidekicks to managing the financial side of your business. It’s essential to work with professionals who have enough experience in their field. If you’re new to accounting and will have to depend on your CPA or bookkeeper’s knowledge and skills, take the time to choose candidates and professionals to hire.
4. Thinking Every Deal Closed Always Equates to Cash Flow
When you’re updating your books and forecasting cash flows, be mindful of how you record your deals. When you don’t consider the money your company needs to put out to complete a project, your books could give an inaccurate picture of your business’s financial status. What happens when instead of earning from a deal, you end up losing money?
Do you need assistance with accounting? Kidmans Partners offers bookkeeping, accounting, and cash flow forecasting services. Let us help you get the peace of mind that you have your books in order and your finances straightened out. Please fill out our contact form or give us a call at (+613) 9836 2900 to learn about our accounting services.